October 31, 2008

Google - more than just search

The Google search engine has had a turbulent life since its inception in the late 1990’s. Having started as a PhD project of Brin and Page, the Google search engine now handles about 70% of all search requests on the Web. Even more, with revenues exceeding USD 16 mln in 2007 Google has become a Web giant indeed. 

Products and activities
It is hard to think of areas related to the Web that Google is not active in. Its product portfolio is huge. Google Search is the infamous search engine that has specialized sections for searching news, images and more. Google News collects and groups news from a wide variety of news sources, both nationally and internationally. Google Mail, Google Calendar and Google Docs of-fer office functionalities and run completely online (with ‘Google Gears’ most of these tools are also available offline). Even more, Blogger, YouTube and Picasa allow users to share their thoughts, movies and photos online. 

Most of these services are free to the public as Google earns most of its revenues by selling ‘clicks’[1] by means of its advertisement programs AdWords and AdSense. These programs aim to to provide advertisements that are ‘relevant’ to website visitors. Subscriptions for businesses to its online office software form a second stream of revenues. Since 2003, the revenues from advertising account for 99% of Google’s total revenues. Interestingly, though, growth rates for advertising are slowly decreasing whereas growth rates for licensing and other activities are slowly increasing. 

Ironically, while working on their dissertation still, the Google founders wrote in their seminal paper the anatomy of a large-scale hypertextual web search engine that they expect that “advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers” and subsequently argue that “from the consumer point of view that the better the search engine is, the fewer advertisements will be needed for the consumer to find what they want”. The authors conclude that the business model of advertisement based search will erode and that, therefore, it is crucial to have a competitive search engine that is transparent and academically solid.

Google is also increasingly active outside the digital realm of the Web. For example, Google re-cently announced a partnership with General Electric, focusing on technology and policy with respect to new, eco-friendly energy grids. This initiative appears totally unrelated to Google’s current activities, but does seem to fit with its efforts for greener data centers. Another interesting development is the fact that Google has recently announced a new browser (Chrome) to speed up developments on the Web, and the fact that it is getting in the cell phone business with its An-droid application platform. 

Working for Google
To make all this happen, Google recruits ‘the best of the best’. Despite the competition for top talent, Google managed to attract over 6.000 new employees in 2007, while 
there are rumors that the number applicants exceed 1.000.000 per year. It appears that Google is in a paradoxical situa-tion where it can’t find enough qualified people, while at the same time many people are applying for a job. 

The fact that so many people want to work for Google is partly due to the ‘coolness factor’. An-other important aspect in this respect is that Google recognizes that it can only do what it does because of its highly skilled employees. These top professionals get to work on some of the toughest technical problems around these days such as managing the huge amounts of traffic that Google’s data centers around the world have to serve every minute of the day.

In recognition of its first class workforce, Google invests heavily into the well-being of its employees, e.g. by giving them free access to food, making sure the office building has plenty of places to relax and giving staff a USD 5.000 allowance to invest in a hybrid car. On top of this all, Google recognizes that if it wants to attract the best employees it must challenge them. This was clearly shown when Google posted tough (math) problems on large billboards, suggesting that if you enjoy solving these puzzles then it is probably a good idea to apply for a position at Google. 

Challenges
Google’s heavy reliance on advertisement poses some interesting challenges for the Web giant. The first challenge has to do with the revenue model. As Brin and Page wrote a decade ago: ad-vertisement based search is heavily biased towards advertisers, not consumers. Given the current popularity of Google, it appears that consumers are willing to put up with the advertisements. This is, however, a very thin line. A second issue has to do with a phenomenon called ‘click fraud’[2]. As click fraud becomes a tool in the battle between companies, Google’s revenue stream could be hampered. To counter this threat, Google recently announced a partnership with Click Forensics Inc, a click-fraud-detection company in an effort to continue to leverage its dominant position on the Web to sell advertisements.

Even more, a battle between several big companies is raging for the consumer’s attention, even though the Web is said to be big enough for everybody. These players include Google, Microsoft and Yahoo, but also include renowned news sites such as CNN and BBC World. In this battle, parties form ever-changing coalitions to stay ahead of the competition. For example, Google and Yahoo recently announced that their advertisements efforts will be bundled. This, in turn, caused concern with the US government who is currently preparing an anti-trust lawsuit with respect to this joint venture. Google’s dominance resembles the monopolist situation that Microsoft has on the desktop. The public is increasingly concerned about Google’s dominance as Google “knows everything about everybody”. It knows what we search, which newsgroups we visit, which we-blogs we follow, which products we’re interested in and so on. To some people this is a scary thought, despite Google’s motto “don’t do evil”.

Finally, several analysts and trend watchers suggest that Google is spreading itself too thin as it is active in so many unrelated activities, thus suggesting that Google insufficiently leverages syner-gies between its activities. They may have a point, even though it is hard to argue with success.  Google can indeed be seen as a ‘big brother’ that knows all, and is active in almost all aspects of life on the Web. Even though competitors, some parts of the public as well as government are concerned with respect to this status, Google is still doing incredibly well. It is said that on the Web, the only constant is change. Google’s biggest challenge is, and will be, to keep up with change. 

Sources:
  • S. Brin and L. Page. The anatomy of a large-scale hypertextual web search engine. Computer Networks and ISDN Systems, 30(1–7):107–117, 1998.
  • Google. Annual report 2007.  
  • J. C. Perez. Google allies with click-fraud-detection firm Click Forensics. Computerworld website, October 10, 2008. 
  • D. Bartz. Yahoo-Google antitrust bar higher than Microsoft. Reuters website, April 13, 2008
  • B. Moriati. Google: everybody’s big brother? The Daily Collegian website, September 28, 2008. 
  • B. Lunn. Is Google spreading itself too thin? The Read Write the Web website, September 23, 2008.
  • T. Claburn. Google, General Electric push renewable energy, grid technology. Information week website, September 17, 2008.
  • E. Zeman. Google: Android Market Will Be More Open Than iPhone Apps Store. Informa-tion week website, Ocotober 3, 2008.
Notes
[1] The AdWords and AdSense programs pertain to advertisments that are placed next to search results or on third party websites. The advertiser pays Google a fee each time someone clicks on the advertisement.
[2] Click fraud happens when someone clicks on an ad with malicious intent. For example, a competitor may click on a rival's pay-per-click ads in order to drive up its ad spending. Or a publisher may click on pay-per-click ads on its site to trigger more commissions.
Post a Comment